How generous are U.S. Social Security benefits, and how likely are today's retirees to enjoy a secure retirement? Some Members of Congress and policy makers say that retirees and disabled beneficiaries are "over paid." They say that cost-of-living adjustments (COLAs) should be reduced, and people should have to wait longer to start benefits.
TSCL's surveys, however, indicate that flat growth in COLAs in recent years and rising housing, healthcare and food costs are taking a toll on Social Security beneficiaries. Rising costs are outpacing the growth in benefits, causing retirees to use their savings faster and to go more deeply into debt. In fact, Social Security recipients have lost 31 percent of their buying power since 2000.
A new report from the Organization for Economic Cooperation and Development (OECD) takes a look at one measure of the adequacy of pension systems around the world — the replacement rate. That measure shows the level of benefits in retirement as a percentage of pre-retirement earnings. The U.S. replacement rate is 41% for individuals with average earnings. When compared with 34 other nations and 8 other "major economies," the U.S. ranked among the lowest at number 36 for the percentage of earnings replaced by benefits. The U.S. ranked lower than Korea and Slovenia, but higher than Ireland and Mexico.
With benefit replacement rates of 41%, that means today’s retired and disabled beneficiaries must live on benefits that are less than half of what they made when they were working. Yet Social Security remains the most important source of income for the majority of Americans.
TSCL is working to fight COLA and other benefits cuts and encourages each of you to join our efforts. Benefit cuts are not the sole means to bring Social Security back into solvency. TSCL supports measures that would lift the taxable maximum on earnings so that workers who earn more than $118,500 pay their fair share of Social Security taxes. TSCL is also working for passage of legislation that would provide a more fair and adequate COLA by basing the inflation boost on the Consumer Price Index for the Elderly (CPI-E) and guaranteeing that COLAs would be no lower than 3% when inflation drops lower.
Sources: "Social Security Benefits Are Stingy," Alicia H. Munnell, Market Watch, November 5, 2014. "Gross Pension Replacement Rates," Pensions At A Glance 2013: OECD and G20 Indicators, OECD Publishing. Income of the Aged Chartbook, 2012, Social Security Administration, 2014.